Photo for Friday EDIT2 Nov 9

Richmond City Hall.

Inaccurate books. Poor communication. Misused money.

All hampered city and schools officials during the past five years and contributed to confusion over the amount of construction and maintenance money available to Richmond Public Schools during last year’s budget process, according to a report issued this week by the city auditor.

The audit doesn’t match Richmond Mayor Levar Stoney’s description of a financial house in order at recent town halls where he’s selling a tax increase, thrusting the survival of his pitch to raise the real estate tax rate from $1.20 to $1.29 per $100 of assessed value further into question.

Most Richmond City Council members have said they won’t support the increase, but Stoney’s spending plan, including $19 million he has proposed for RPS maintenance projects such as HVAC and roof repair, depends on it.

Kimberly Gray, the 2nd District councilwoman and a frequent critic of Stoney, seized on the auditor’s findings as evidence that the city and school system hadn’t properly handled the money they already have.

“We cannot afford to have this level of waste and the lack of accountability,” Gray said.

Auditor Lou Lassiter’s analysis began at the council’s request after city and school officials clashed last year over how much remained in the school system’s maintenance and construction budget.

Council members thought RPS had a certain amount of money. The school system said it had far less. Months later, after purportedly balancing the books, Stoney’s administration announced different figures altogether.

What happened?

Lassiter discovered poor accounting practices over the course of several years during former Mayor Dwight C. Jones’ administration. His team also found problems with the figures Stoney’s administration said it had reconciled and released last summer, according to the report.

Five of the six accounts tied to school maintenance and construction did not have accurate balances, the result of erroneous or inappropriate charges and other sloppiness in accounting.

The largest of the six RPS accounts, planning and construction, is managed by the city’s Special Capital Projects team in the Department of Public Works. The council budgeted about $187 million for the account between July 1, 2013, and June 30, 2018.

The auditors found 72 invoices totaling $17.6 million that city staff initially categorized as miscellaneous expenditures, then later charged to the construction and planning account. Some charges they looked at were moved or changed several times, and in some cases, years after they were initially documented, the report stated.

The Stoney administration attributed the discrepancies to poor training during the rollout of a new financial system, which occurred under Jones, the report stated. The system, called RAPIDS, was the source of financial reporting woes during the Jones era. Compounding the problems with the system were turnover and vacancies in the Finance Department. Under Jones, the city failed in three consecutive years to submit on time an annual financial report to the state showing spending and revenues. Stoney’s administration has filed it on time in each of the past two.

In an email, Jones said he hired the administrators who worked to iron out issues with the financial system. Those include: Chief Administrative Officer Selena Cuffee-Glenn, Deputy Chief Administrative Officer for Finance Lenora Reid and Finance Director John Wack.

“The leaders I appointed are still in place and I am sure operations are continuing to improve under their leadership,” Jones said.

Last year, Stoney’s administration said $12.2 million remains in the school planning and construction account, but the auditors said they couldn’t determine if the figure was accurate because of how expenditures were documented and shifted in the financial system over time. They did recommend reclassifying $142,000 worth of charges they reviewed.

Four other school accounts — two pertaining to maintenance projects, one tied to high school sports facilities and another related to accessibility projects — were not properly reconciled, either, the auditors found.

Three of the accounts were overstated by a total of about $453,000. One was understated by about $80,700. The auditors found the errors only after sifting through boxes of hard copy documentation and checking it against the city’s electronic ledger, which was not accurate, Lassiter said.

The report notes the information in the financial system — used to generate monthly and quarterly reports to the council and the numbers that appear in the budget — provided the council and public with a distorted snapshot of how much capital money was available to the school system.

Kristen Larson, the 4th District councilwoman, who, like Gray, was a member of the Richmond School Board when many of the problems occurred, said the auditor’s findings were concerning, and she wanted further investigation into how the Stoney administration is managing its capital projects.

“It’s crazy,” Larson said. “You just can’t effectively operate a city budget this way.”

Also complicating the accounting was slow turnaround times for reimbursements on building and maintenance spending the school system submitted to the city. For example, in 2016, the city finance staff took an average of 151 days to enter reimbursement amounts for schools into the financial system, the auditors found.

City officials did not notify schools officials if the requests were accepted or denied in a timely fashion, either, the report states. The turnaround time has improved in the years since, the auditors noted.

The auditors also found instances of expenses charged to the capital budget that shouldn’t have been. Those included $357,000 for the rental of trailers for office and classroom space and $70,572 for services tied to grand opening ceremonies at Huguenot High School and Martin Luther King Jr. Middle School under the Jones administration. City finance staff signed off on reimbursing the school district for the costs, but they shouldn’t have qualified, the report states.

As a part of the audit, Lassiter’s team randomly selected three capital projects unrelated to schools to analyze. They flagged two of them.

As recently as 2018, city staff erroneously charged $345,000 tied to the renovation of Monroe Park to an RPS account. The sum was part of $2.95 million worth of charges that were misclassified as school construction and planning costs that the auditors found as of June 30, 2018. The administration had since moved or planned to move about $2.8 million of it, the report stated.

In the other instance, what the city’s financial system said had been spent on a project involving Main Street Station — $3.27 million — did not line up with what the budget stated the city had spent on it: $2.73 million.

In this case, the ledger was accurate, but the budget was not, Lassiter said. The Stoney administration attributed the $543,000 variance to the Department of Economic Development providing “estimated figures” to the budget office, the report states.

Jim Nolan, a Stoney spokesman, said the administration had agreed to all eight of the auditor’s recommendations. Among those, city officials will perform monthly reconciliations of school capital funding accounts.

“We appreciate the collaborative work of the city auditor, city finance staff and RPS leadership to complete this review of the city’s Capital Improvement Plan, which will help ensure that all appropriate accounting practices are in place moving forward,” Nolan stated in an email.

The auditors are scheduled to present their findings to the Richmond Audit Committee in June.

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